US trucking company Yellow filed for bankruptcy on Monday and will close its doors. It collapsed under the weight of $1.2 billion in debt, which included a federal loan and a heated dispute with the Teamsters.
The nearly century-old company, which filed for Chapter 11 bankruptcies late on Sunday at the Delaware bankruptcy court, stated that it intended to sell “all” or “substantially all” of its listed assets valued between $1bn to $10bn.
The federal government now owns 30% of the company. The company was then called YRC Worldwide and received a $700mn Covid-19 loan during summer 2020. Chief executive Darren Hawkins stated in a press release that the loan will be paid “in full”.
Hawkins stated that the company will also “maximise recovery for creditors”. Yellow listed Berkshire Hathaway’s railroad BNSF as well as Amazon, Home Depot, the DIY chain, and tyremaker Goodyear on a list with unsecured claims totaling at least $1mn. The company also owes private equity firm Apollo Global Management about $500mn via a loan.
This closure will lead to the loss of approximately 30,000 jobs and further disrupt the trucking sector, which is already struggling with a drop in freight demand amid a cost-increasing environment.
Yellow wanted to revamp its operations that had been stitched by several large acquisitions in the last 20 years. The Teamsters blocked its proposed shake-up efforts this spring. Hawkins stated in a press release that the company had “suffered nine months of union intransigence and bullying, as well as deliberately destructive tactics” which caused Yellow to suffer “irreparable damage” and drive away customers.
Teamsters reported that they received legal notice at the end July that Yellow had filed for bankruptcy and was ceasing its operations. In a statement released last week, Teamsters General President Sean O’Brien stated that Yellow had historically shown it was unable to manage itself in spite of billions in worker concessions as well as hundreds of millions of bailout funds from the federal government.
The union struggle added to the pressure on a company that had a lot of debts, which were due to be paid in most cases by 2024.
Yellow has been under pressure since the shipping boom during the pandemic, especially as big box retailers are trimming inventory because of weak demand from consumers for discretionary products.
The company’s most recent quarter saw a net loss of $54.6mn, largely due to the recent increase in fuel prices and stagnant demand for shipping.
Yellow’s bankruptcy may also impact the domestic supply chain by increasing freight rates for customers. One of the lowest-cost carriers in the industry is leaving the market.
Mario Harik, CEO of rival trucking firm XPO, acknowledged during a earnings call last week that Yellow’s bankruptcy filing could “disrupt” the industry. He said that the shake-up would allow XPO “to accelerate price and volume growth above our original targets”.